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Building permits
February 2004

Highlights

Construction intentions in Canada’s housing sector fell in February for the second consecutive month. However, the decline was offset by a strong rebound in proposed non-residential projects.

As a result, the overall value of building permits rose 1.6% from January to $4.4 billion.

Builders took out $2.79 billion in housing permits, down 4.8%, the second consecutive monthly decline since the record high of $2.95 billion in December. Construction intentions for both single-family and multi-family components retreated. Despite the decline, the value of residential projects remained 4.7% higher than the average monthly level in 2003, which was a banner year.

In the non-residential sector, gains in all three components – industrial, commercial and institutional – fuelled a 15.1% jump in permits which reached $1.6 billion, the highest level in seven months.

On a year-to-date basis, the total value of building permits hit $8.7 billion, up 3.4% from the first two months of 2003, due to the sustained demand for new dwellings. Builders took out $5.7 billion in housing permits for the first two months of 2004, up 12.4%. However, permits in the non-residential sector fell 10.3% to $3.0 billion.

Regionally, the fastest starts occurred in the census metropolitan areas of Montreal and Vancouver. In both areas, combined strength in the residential and non-residential sectors led to the strong showing.

Declines in both single- and multi-family permits

Construction intentions for both single-family and multi-family projects declined in February.

Municipalities issued $885 million in multi-family permits, down 9.1% from the record high of $974 million in January. About 8,600 new multi-family dwellings units were approved, down 8.0%.

Permits for single-family dwellings fell 2.6% to $1.9 billion, the second monthly decline in a row. Municipalities authorized 10,100 new single-family dwellings in February, down 4.0%.

Despite declines over the last two months, underlying economic factors point to strength in the coming months in the residential sector. Mortgage rates remain advantageous; housing affordability is healthy and the consumer confidence was still high at the beginning of 2004.

Provincially, the strongest decline in housing permits occurred in Quebec where they fell 14.5% following a record high in January. British Columbia and New Brunswick also posted sizeable retreats after peaks in January. Alberta posted the largest gain.

On a year-to-date basis, builders have taken out $1.9 billion in multi-family permits in two months this year, up 26.2% from the January-February total last year. The value of single-family permits was up 6.8% to $3.9 billion.

In two months this year, municipalities have already authorized 38,600 new dwellings units for construction, up 7.0% from last year.

Big rebound in all three non-residential components

All three non-residential components scored a rebound in February, reversing January’s declines. The $1.6 billion in permits was the highest monthly value since July 2003 when the total hit $1.8 billion.

Permits in the commercial sector increased 5.0% to $882 million, following a 3.8% decline in January. The gain put commercial intentions at their highest level since January of 2003. Ontario incurred the greatest gains in dollar terms, followed by Alberta. The commercial sector is healthy as consumers were a driving force behind economic growth for the third straight year in 2003 according to the Canadian Economic Accounts. This buying spree has continued into this year, with retail sales (excluding sales by motor and recreational vehicle dealers) setting a new record in January.

Investment intentions in the institutional sector rose 41.9% to $451 million following four straight months of decline. It still left the sector 7.7% below the monthly average for 2003. The growth was centered in Ontario and Quebec, where medical and educational facility projects dominated. Nova Scotia was the only other province where institutional permits rose.

Industrial intentions jumped 15.2% to $254 million, but this was still 15.7% short of the monthly average for 2003. Recent and future results could be influenced by the weakness Canadian merchandise exports have shown of late. The latest merchandise trade statistics show that export sales experienced a broad based decline in January, the 7th retreat in the past 10 months. Furthermore, manufacturers’ shipments have fallen for three out of the past four months.

Central Canada proved the powerhouse in February with the greatest monthly gains in non-residential value coming from Quebec, followed closely by Ontario.

Despite the monthly increases, the value of permits issued for the first two months of 2004 slumped to just under $3 billion, 10.3% lower than for the same period in 2003. Continued strength in commercial intentions has been offset by declines in the other two components.

Half of the provinces have posted gains over 2003 on a year-to-date basis, with Quebec showing the biggest increase. Municipalities there approved $697 million in non-residential building projects in the first two months of 2004, up 38.6% over the same period last year.